Comments on: WSJ Notes Employment ‘Whoops,’ But Should Have Gone Further http://www.bizzyblog.com/2006/10/09/wsj-notes-employment-whoops-but-should-have-gone-further/ The Business End of the Blogosphere Sat, 10 Jan 2009 01:01:57 +0000 http://wordpress.org/?v=2.5 By: TBlumer http://www.bizzyblog.com/2006/10/09/wsj-notes-employment-whoops-but-should-have-gone-further/#comment-34476 TBlumer Mon, 09 Oct 2006 22:47:04 +0000 http://www.bizzyblog.com/2006/10/09/wsj-notes-employment-whoops-but-should-have-gone-further/#comment-34476 Dean, thanks for the comment. I\'m glad you did, because I meant to blogroll you yesterday (under Money), and forgot. I was introduced to your work yesterday by a commenter at my NewsBusters post on the deficit, and I read a couple of your columns on the late 1990s bubble. It is worth noting that somebody in the left side of the economic aisle was smart enough to recognize the overhyped reality at the time. On the employment issue, your point is very well-taken. My response would be that the Establishment Survey has ALWAYS understated total employment compared to the Household Survey (i.e., the Establishment Survey has always been wrong), and that it is simply a matter of degree. The gap between the two now is about 8 million jobs and it was significantly narrower during the mid-late 1990s. I fail to come up with a reason why the Household Survey might overstate the total number of jobs that is as compelling as the reasons why the Establishment Survey always undertstates, which is simply this: it would seem to be a lot harder to locate a new business, especially a proprietorship or partnership without employees who contracts out all work, than it is to locate a new household. Overstatement of Household Survey workers would depend on people lying by saying they have jobs when they do not, which seems unlikely. As to your point about SocSec records -- there are lot of people who are 1099 contractors and self-employed, probably more than there used to be. I question whether SocSec is as good at tracking these. Even if they are, people who have moved into contracting or self-employment will not get picked up as working by Social Security until they start making estimated payments. Many do not do this in their first year and get their April surprise when they fill out their 1040s; by that time they may have been working as long at 15 months. Additionally, many contractors NEVER make estimated payments because they have their spouses overwithhold at their employer. I would guess it might take SocSec a good two years before they pick up a self-employed person or contractor in that position, because they totally depend on the IRS to pass the data over. Dean, thanks for the comment. I\’m glad you did, because I meant to blogroll you yesterday (under Money), and forgot.
I was introduced to your work yesterday by a commenter at my NewsBusters post on the deficit, and I read a couple of your columns on the late 1990s bubble. It is worth noting that somebody in the left side of the economic aisle was smart enough to recognize the overhyped reality at the time.

On the employment issue, your point is very well-taken. My response would be that the Establishment Survey has ALWAYS understated total employment compared to the Household Survey (i.e., the Establishment Survey has always been wrong), and that it is simply a matter of degree. The gap between the two now is about 8 million jobs and it was significantly narrower during the mid-late 1990s.

I fail to come up with a reason why the Household Survey might overstate the total number of jobs that is as compelling as the reasons why the Establishment Survey always undertstates, which is simply this: it would seem to be a lot harder to locate a new business, especially a proprietorship or partnership without employees who contracts out all work, than it is to locate a new household. Overstatement of Household Survey workers would depend on people lying by saying they have jobs when they do not, which seems unlikely.

As to your point about SocSec records — there are lot of people who are 1099 contractors and self-employed, probably more than there used to be. I question whether SocSec is as good at tracking these. Even if they are, people who have moved into contracting or self-employment will not get picked up as working by Social Security until they start making estimated payments. Many do not do this in their first year and get their April surprise when they fill out their 1040s; by that time they may have been working as long at 15 months. Additionally, many contractors NEVER make estimated payments because they have their spouses overwithhold at their employer. I would guess it might take SocSec a good two years before they pick up a self-employed person or contractor in that position, because they totally depend on the IRS to pass the data over.

]]> By: Dean Baker http://www.bizzyblog.com/2006/10/09/wsj-notes-employment-whoops-but-should-have-gone-further/#comment-34349 Dean Baker Mon, 09 Oct 2006 21:28:47 +0000 http://www.bizzyblog.com/2006/10/09/wsj-notes-employment-whoops-but-should-have-gone-further/#comment-34349 We actually have an independent source on this issue -- the Social Security Admnistration's tax collections. If your adjust for changes in hours and wages, this had (through 2004) tracked the establishment survey very closely. So, I would be hard-pressed to take the results of a survey based on 60,000 households over two surveys effectively baed on two independent censuses of the labor market (UI filings and SS taxes). It is also worth noting the HH data substantially understated job growth compared to the establishment survey in the 90s. Does anyone want to conjecture as to the radical change in the labor market since 2000? We actually have an independent source on this issue — the Social Security Admnistration’s tax collections. If your adjust for changes in hours and wages, this had (through 2004) tracked the establishment survey very closely. So, I would be hard-pressed to take the results of a survey based on 60,000 households over two surveys effectively baed on two independent censuses of the labor market (UI filings and SS taxes).

It is also worth noting the HH data substantially understated job growth compared to the establishment survey in the 90s. Does anyone want to conjecture as to the radical change in the labor market since 2000?

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